Existing Home Sales Surge

by Coldwell Banker Evergreen Olympic Realty, Inc. on August 21, 2009

The National Association of Realtors reports that in July sales of existing U.S. homes increased 7.2% over the June 2009 pace of sales. We are now at a seasonally adjusted rate of 5.24 million units.

It is the fourth month in a row that sales have increased, marking the first time since June 2004 that we’ve had such a string of positive gains.

Year over year sales are also up. In July 2008, we had a 4.99 million unit pace of sales. We have to look all the way back to November 2004 to find the last time we had a year over year gain in nation-wide sales.

The sales gains were not evenly shared around the country. Some areas are seeing bigger gains than others. The Northeast jumped 13.4%, the Midwest is up 10.4%, the South rose 7.1%, and the West is down 1.7%. All areas were ahead of July 2008 levels.

There is one simple reason for the surge in activity – price. Regular followers of our blog will know that we routinely discuss price and how it is the solution to getting housing going again.

For a long time prices have been well above current levels of supply and demand. When that happens, buyers simply do not purchase. Now that prices are coming back to match the supply-demand picture buyers are back.

The national median sales price for existing homes is down 15.1% in from the same period a year ago. Prices are down 32% from the peak in 2006.

The lower prices have made the home price to income ratio the best it has been in years. This means homes are affordable again. And affordability is the key to stability and sustainability in housing.

The emergence of the subprime, adjustable-rate or interest-only loan products earlier this decade created a false sense of affordability. The return to predominately fixed-rate lending coupled with lower home prices is creating a more sustainable base of homeowners who will now know they can truly afford their homes over the long-haul.

Even with the brisker pace of sales, there are still enough houses for sale to keep us squarely in a buyer’s market. The inventory of unsold homes in the U.S. stands at a 9.4 month supply. However, supply has dropped by two months in just a year.

Locally, our supply is just below 7.4 months. A balanced market has a four to six month supply of homes for sale, and we are definitely trending back toward that kind of market.

For the latest on July 2009 sales in our local market, read our August 6, 2009 blog post.

Click image to enlarge.

Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.

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